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How NIKE’s Dividend Policies Compare With Peers

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Jan. 1 2015, Updated 8:36 a.m. ET

Net income rises

As a result of the cost and revenue-side factors described previously in this series, NIKE’s (NKE) net income rose 23% to $655 million in 2Q15.[1. Quarter ending November 30, 2014 – Fiscal year ends on May 31, 2015] The increase in earnings per share, or EPS, was higher at 25%. EPS rose to $0.74 from $0.59 a year ago.

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Dividends

NIKE has increased dividends 13 years in a row. NIKE’s payout ratio in 2Q15 worked out to ~37%. The company paid out $0.28 per share by way of dividends in 2Q15, higher than $0.24 per share paid in 2Q14. In contrast, newer rivals Under Armour (UA) and Lululemon Athletica (LULU) haven’t paid a dividend as yet.

Companies usually like to keep cash close when there are compelling business opportunities to invest it. Although NIKE’s growth rates are very healthy compared to the consumer discretionary sector and the overall economy, UA and LULU have higher expected growth rates because they’re essentially starting from a smaller base.

For a business overview of Under Armour, read High-Performance Winner? Your Must-Know Guide To Under Armour.

For a business overview of Lululemon Athletica, read Company Overview: An Investor’s Key Guide to Lululemon Athletica

Dividend payouts by older companies

A more comparable rival of NIKE’s is VF Corporation (VFC), NIKE’s competitor in certain apparel and footwear categories. VFC is an older company with established footwear and apparel brands such as Timberland and The North Face. VFC is also a dividend aristocrat. The company has raised its dividends 25 years in a row.

Both NIKE and VFC have been around for decades. While growth may not be exponential anymore, being able to consistently increase dividends over the years points to VFC and NIKE business model stability. The two companies have respective dividend yields of 1.1% and 1.3%.

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